Lots of people are talking about employee ownership at the moment, which is fantastic. But most people do not really understand how it works. This lack of awareness helps perpetuate the myth that employee ownership is a boutique way of working in the business world.
In simple terms, employee ownership describes a business that is totally or significantly owned by its employees. It takes one of three forms: the workforce directly owning a large proportion or all of the share capital of the business; the share capital of the business being held indirectly in trust for the benefit of the employees; or a hybrid of these two approaches. So far, so simple. UK employee owned businesses are exactly that: businesses. Their focus is on keeping customers happy, on profitability and, like any other business, looking after their shareholders. The difference in an employee owned company is that the shareholders are the workforce.
As the spokesman of one successful employee owned business regularly says when asked what sort of business can be employee owned "Any business that has people in it!". Whether that is on the high street, in the health service, or in our postal service there is a growing interest in the idea of empowered and engaged staff who are committed to what they do, and to finding ways of innovating and doing it better. Well, why would there not be?!
So if you are a business owner looking to secure the future of your business, or an entrepreneur who wants to share ownership from day one, how can you achieve the higher productivity, greater levels of innovation, better resilience to economic turbulence and more engaged, happy workers that studies by Cass Business School, Edinburgh Napier University, Kenexa, and others show come from employee ownership? And how do you know if it is right for your business? Here are some tips on where to start if you are interested in successfully adopting employee ownership:
DO NOT........
•get bogged down in the technical details of legal and financial implementation; focus instead on the big picture of the long term legacy you want the business to create for employees, their customers and the local community.
•try to run before you can walk. Changing an organisation's culture takes time and needs to be sensitively handled. Deeply involve employees in the change process - do not cut corners in a race to meet artificial deadlines.
DO...
•build a way of working that creates a genuine sense of ownership and inclusion amongst your employees. The united sense of purpose and commitment that employee ownership delivers helps attract and retain the very best talent so that you can compete successfully in chosen markets.
•think about key principles: how the move to employee ownership will be funded; what long term safeguards for employees the structure needs to contain; how the voice of the employees is to be protected; and how senior managers will remain free to commercially drive the business day to day whilst still being properly accountable to the employee owners.
People are usually surprised at how simple and straightforward it is to introduce employee ownership. And the costs of creating an employee owned business are modest compared with other types of company formations and/or mergers and acquisitions. Anyone interested in creating an employee owned business should start with reading our practical guide to setting up an employee owned business in the UK.
So what does the future hold for employee ownership as a way of doing business? All of the main political parties recognise that employee ownership makes massive economic sense and have endorsed the EOA's target of 10% of GDP being delivered by employee ownership by 2020. We were delighted to see the announcement in Budget 2013 of some fiscal incentives to support the growth of the model, the details of which are currently out for consultation. But Government will have to significantly increase the funding for these measures beyond the initial £50m per year that has been set aside, if they are to be more than token gestures. And it is vital that this is the start of a series of year on year reforms to help to grow employee ownership rather than a one off measure. If the huge potential of the employee ownership model for the UK is to be realised Budget 2013 has to be the start of a journey for employee ownership not a destination.
Employee ownership is a successful business model in every sector of the economy that constantly challenges the conventional wisdom of those who suggest business owners should always share ownership with external investors.
We really are very much in the decade of employee ownership - its time has come.